Biosphere and economy

The relationship of economy and nature has become controversial, a fact well recognisable in the schematic fi gure (Figure 1-1.) that illustrates the corre-lation between the biosphere, the social system and the economic system.

The circles indicate the embeddedness of these systems within each other;

the largest system, the biosphere, is located outside with the social system within; next, the even-smaller economic system with the industrial subsys-tem inside (Tyteca, 2001). Some dispute whether the biosphere can indeed

‘contain’ the social-economic system with its present – and even less with its future – size.

The most problematic issue from the conservation perspective is that, ac-cording to conventional economic logic, the ecological system supplies free assets (according to the demand for raw materials and energy) which are then returned to the ecological system in the form of waste (throughput economy).

Throughput economy: the operation of traditional economies from an eco-logical economic perspective. This says that the traditional economy re-sembles a system (such as a digestive tract) that is fed with useful (low-en-tropy) energy, raw materials, and natural resources. At the output end (and even during the process) are produced useless (high entropy) by-products and pollutants. In reality, useful end-products fi t for human consump-tion also become waste after use. One of the main efforts of ecological economics is to ‘stop’ energy and matter throughput, and turn economic activity into – or come as close as possible to – a ‘circular’ process, as seen in nature. As a result, energy and material economies of scale will be realised, and the effi ciency of the use of energy and other resources will signifi cantly increase.

The ‘value creation’ performed by the economic system is waste production from the ecological perspective, or expressed in scientifi c terms, involves the transformation of low-entropy natural resources into high entropy waste. How-ever, the economic system satisfi es human needs with products and services produced through the industrial subsystem. ‘Value creation’, however, involves loss of value, involving a deterioration from nature’s perspective. The speed at which this loss of value occurs is certainly not irrelevant; neither is it indifferent at what level the economic system satisfi es human needs during the process.

These controversial issues are illustrated in Figure 1-1.

Figure 1-1. The mutual embeddedness of economic, social and ecological systems (Daniel Tyteca CEMS block semenarium presentation, August 2002, Tata, Hungary).

A company that satisfi es human needs with only minor growth in entropy creates more value than one that causes major growth of entropy, the satisfac-tion of needs being equal. The former company may be considered to be value creating, while the latter wastes nature’s assets. Methods recently developed in the environmental sciences such as life cycle analysis, or on a macro-scale the calculation of ecological footprints, largely attempt to answer the question to what extent a given product or service (or the economy of a given country) can be considered environmentally friendly.

Figure 1-1. also demonstrates another controversy that is elementary from the perspective of the functioning of society: the economic system strives to minimise the use of labour force as input, while on the output side maximum employment is desirable. The contradiction is irreconcilable, and the proffered solutions are none too convincing.

The contradiction could be resolved by reducing average working hours or lowering retirement age. However, in developed countries policymakers pur-sue the very opposite solution, and, unfortunately, individuals also tend to prefer a higher income over more leisure time. Shorter working hours would expose companies to challenges concerning the organisation of work, and re-ductions (or only maintenance) of incomes for employees. The rapidly growing population of the Earth in itself provides adequate justifi cation for reducing per capita weekly working hours, for example by making extensive use of 35-hour or even shorter working weeks. A cut in standard working hours would also be justifi ed by the rapid spread of automation/robotisation, but such initiatives are rare in practice.

For the most part, social scientists are at odds in terms of the numbers. With reference to labour productivity, economists use value added at factor cost di-vided by the number of employees (Labour productivity in EU-27 by sector and company size [2004–2005], n.d.). As regards the heart of the matter, this macro-defi nition makes little sense because for the same work USD 50 is paid to a worker in Norway, USD 8 to one in Hungary, and barely USD 2 to one in India.

Examining the case of Bethlehem Steel, where he was responsible for handling pig iron, Taylor found that when workers used the right tools and methods they could handle 47.5 tons per day, whereas typical per capita performance was 12.5 tons a day. According to Taylor’s calculations, with a precisely regulated loading procedure 140 workers would have suffi ced instead of the regular headcount of 500. Taylor developed a fi nancial incentive system to compensate workers who were able to meet the new standard. Taylor’s methods of organising work led to a sharp increase in labour productivity at the factory, and the power of Taylorian organisation has since become phenomenal. Rather than making workers work more, Taylor’s objective was for them to work more reasonably, and earn more as a result (Frederick Taylor and Management, n.d.).

Data concerning the increase in the productivity of agricultural work are available to the public. In the past one hundred years, while the amount of cereal grown per hectare has increased 6-10 fold, the number of working hours and thus the number of employees per hectare has dropped to a 15-20th of earlier amounts. It is common knowledge that in developed countries 2-5% of the total workforce are capable of providing the whole population with food, and before long the proportion of industrial employees will drop below 5-7%.

According to optimistic analysts, employment issues will be dealt with by the uptake in the service or tertiary sector. Others predict growth in free time be-cause the same amount of work will be distributed among more people, which will result in a double benefi t: more free time favours the development of the service sector and creates demand for services.

The situation appears to be more complex in the light of statistical data. In certain regions – e.g. South America – a third generation is growing up in which

no-one in the family has had a permanent job; this generates huge social ten-sion and there is not much hope that children socialised in such families will become employed as adults.

The other no less surprising fact is that employees’ free time is not increas-ing, even in developed countries; what is rather typical is that people work more than eight hours a day and cannot even take their vacations. Examination of the labour market shows that there are very few jobs involving 4-6 hours’

employment, which would be indispensable for the healthy functioning of fami-lies. That is to say, changes in the labour market do not attest to the more op-timistic predictions; a developed economy can only cope with a well-qualifi ed labour force that is prepared to compete, and those who want nothing ‘but’

to make a living are useless in the current economy. Social services in welfare states attempt to handle these issues, which are usually easily manageable in an economic sense. The productive economy is capable of taking care of the physical needs of the unemployed. Maintaining the quality of life of the millions excluded from the economy, however, is a more complex problem than satis-fying their physical needs.

The issue of unemployment is not merely concerned with livelihoods, but the stability of society as a whole. It is worthwhile citing at some length the work of the outstanding Hungarian-born scientist Tibor Scitovsky: ‘I completely ig-nored the idle poor, the long-term unemployed and the unemployables whose inadequate upbringing made them unfi t for work; in short all those who have more leisure than they know what to do with and suffer from uninterrupted chronic boredom, a deprivation as serious as starvation, with equally fatal con-sequences. As hunger makes one look for food, so boredom makes one seek excitement; and just as people with no money for buying food stoop to thiev-ing to avoid starvation, so those who lack the skills that can relieve boredom is a harmless way, will relieve it with violence or vandalism–the most exciting and so most enjoyable activities, and the only ones that require no skill, only strength or a weapon. Think of the mischief small children engage in when bored. Violence and vandalism are the adult equivalent. Education therefore not only adds interest and variety to people’s lives, it is also an essential and necessary condition of civilized society and the peaceful coexistence of its members’ (Bianchi, 2012).

The ‘second shift’ that is done in households creates economies that are used for accumulation, even in the middle class. If instead of accumulating the income saved by this second shift we paid employees to do most of the

‘housework’ and provide a quality service, we would have more free time and the quality of our lives would improve. Social differences would be reduced with very benefi cial social-environmental effects. Finally, we would live in a world capable of remaining in harmony with Earth’s limited carrying capacity.

The economy could fi nally use the resources that are available without limits:

the human labour force. One of the main obstacles to this is man’s possessive-ness. If individuals did not desire to possess but rather satisfy their needs, they would not strive to accumulate assets but to maximise happiness.

Disregarding housework is a frequently noted error with GDP calculations.

Providing that such activities are turned into paid services in the future, this would result in the growth of GDP and reduce environmental impact.

Greater division of labour could produce several positive effects. The degree to which the world is prepared for this is questionable, but interestingly, posi-tive examples are found in two directions. In retrospect, a primiposi-tive communal society represented a world that exploited the opportunities and benefi ts of-fered by shared activities. From there, we have moved towards an individual-istic society that places excessive emphasis on private property and makes consumption prestigious. We have now reached a point at which some part of developed society has had enough of the proliferation of private property, and the capitalism that it has created. In the spirit of voluntary simplicity, an increasing number of people are making attempts at switching to a model that questions the conventional values of consumer society (Chapter 8). The scar-city of Earth’s resources (Chapter 4), problems resulting from pollution (Chap-ter 2), and population growth in developing countries vs. population decline in developed countries across the world are problems that are so well known that they almost sound trivial. Not only has the demand for consumption been increasing in developed countries, it is also being driven by the new middle class emerging in developing countries, particularly India and China. This will lead to severe sustainability problems in both the long and short term.

Ehrlich’s model illustrates what components defi ne total environmental impact.

It hypothesises that:

I = P*A*T, where

I - Environmental Impact P - Population

A - GDP per capita

T - Impact per Unit of GDP (technology).

Total environmental impact is thus created by the product of population, per capita affl uence and impact per unit of the economy.

The role of the population in the model needs no special explanation; the environmental impact is primarily defi ned by the number of Earth’s inhabit-ants. The model takes all goods that an individual consumes as aggregate consumption per capita. Such units of consumption may include kilometres driven by car, kilograms of beef that are eaten, or units of beer consumed as expressed in litres. Each service or product consumed by the population

creates some impact on the environment through the raw material used for production and the pollution emitted to the environment, but mainly through a combination of both. This fact is incorporated into the model as the size of environmental impact per unit of service – for example,the impact caused by one km that is driven (Meijkamp, 1998).

In a study published in 2000 (Mont, 2000), the Swedish Environmental Protec-tion Agency drafted the following three opProtec-tional soluProtec-tions for addressing the ever more urgent issue of sustainability:

• reduce population

• reduce the level of consumption

• make consumption sustainable.

The fi rst option is obviously impracticable in the short run, since all the indica-tions are that even if the growth rate of the population does not accelerate but is maintained, global population could reach 8-10 billion by 2100 (Walker H. C.).

Sustaining such a huge population clearly makes the second option (cut-ting down on consumption) impossible. The situation is made even graver by the fact that most of the population growth will happen in developing regions where living standards lag far behind those of the developed part of the world.

In terms of improving economic performance, however, even the citizens of poor regions will want to have consumption patterns similar to those of the

‘developed’ world. Moreover, inhabitants of countries emerging from poverty are liable to be much less be sensitive to the conservationist perspective and be inclined to exploit environmental resources disproportionately to enjoy mar-ginal improvements in their living standards. Efforts aimed at reducing the rate of consumption could also evoke a major public uproar in countries where inhabitants already consume at a rate in excess of their needs. No national government would be ready to support such programmes.

As mentioned, one of the commonly observed fl aws with the way GDP is calculated is that it fails to take into account work carried out in households (Chapter 3). If in the future such activities were to be converted into services rendered for money, this would both drive GDP growth and lead to reduced environmental loads.